Like many businesses that sell returnable goods, Zirafa, a children’s shoe retailer based in Zilina, has found itself on the losing end of Slovakia’s transaction tax, which came into effect in April. The company’s online shop is now generating unexpected costs.
In short, they must pay the transaction tax even on items that are returned. The tax is deducted from the amount refunded to the customer. For instance, if a pair of shoes costs EUR 100 and a customer returns them because they don’t fit, Zirafa refunds the full amount – but EUR 0.40 is still taken as tax from the company’s account. The firm makes no profit on the sale, yet still pays the state.
“Since the tax was introduced, customers have returned 152 orders worth around EUR 9,700,” Zirafa owner David Kelar said.
He added that he was unsure how much tax the company had paid so far. Prices haven’t been raised yet, but the firm may soon have no choice.
Other online retailers are facing the same issue. Liliana.sk, which sells underwear, has already slightly increased prices. Its manager, Marian Durmek, noted that e-shops were not allowed to charge customers for returns, meaning they could not offset the tax cost that way.
The tax’s design also leads to inconsistent outcomes. Whether or not it applies depends on how the customer pays and how the refund is processed.
If a customer pays by bank transfer or mail order, and the refund is also made via bank transfer, the bank automatically deducts a 0.4% tax. But if the customer pays by card through a payment gateway and is refunded the same way, no tax is applied.
This puts some retailers in a better position. Lenka Garaj Hdecova, co-founder of Mile.sk, which sells clothing for women and children, says they now try to steer customers away from mail orders to avoid unnecessary charges. So far, they have not raised prices.
Some companies are considering relocating abroad – particularly to the Czech Republic – to cut down on these extra costs. Unlike physical shops, which can ask customers to pay in cash and avoid the tax to some degree, online shops have no such option.
Miriam Galandova, head of the Slovak Chamber of Tax Advisors (SKDP), said there was no expert consultation before the tax was approved. She believes that, had there been, issues like this could have been avoided.
Finance Minister Ladislav Kamenicky previously estimated that the tax would generate over EUR 530 million for the state. As of mid-July, more than three months after the tax came into effect, it had brought in around EUR 43 million – at a time when not all banks had begun applying it to every transaction.
However, experts warn that Kamenicky’s target is unlikely to be met. If it falls short, the government will need to make up the shortfall in next year’s budget. (The Slovak Spectator)